Q. My company regularly pays expenses on my behalf which I later reimburse the company for so I have a variable outstanding debt with the company during the year. I‘ve read that if the total of that debt exceeds £10,000 at any point the company must pay NIC at 13.8% on the entire amount. Is that correct?
A: The company must pay NIC at 13.8% on the value of the deemed interest on the outstanding debt, which is treated as a taxable benefit for you, assuming you don‘t actually pay interest on that debt.
While the total debt is less than £10,000 there is no taxable benefit in kind, so it’s only periods during which the debt exceeds £10,000 when the nominal interest needs to be calculated at the official rate (currently 2.25%).
If the debt was £12,000 for 3 months, the benefit in kind would be: (2.25% x 12,000) x 3/12 = £67.50. As a 40% taxpayer you would pay tax of £27. The company would pay NIC at 13.8% on £67.50 = £9.32.
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